Daily Investment Interpretations

May 25, 2010

2010-5-25:  My TopStock investment advisory service was conspicuously silent yesterday and this morning. Its founder was obviously embarrassed at what happened yesterday and again this morning, and he has said so to his subscribers. But it's not given to us mere mortals to call the day-to-day fluctuations in the markets. Attempts to hit the exact bottoms of market moves are conspicuously unsuccessful. He's advising his subscribers to take a wait-and-see position unless the indices decline a bit further (in which case, he'll advise selling at a slight loss). And given the current market rebound, his recommendations may well be vindicated: Don't panic (video). (Today has been a battle between hooves and claws and between fangs and horns. Whoosh! What a day!)
    The NASDAQ Composite lost
2.6 points (-0.12%) to 2,210.95, the Dow dropped 22.82 points (-0.23%) to close at 10,043.75, and the S&P 500 rose 0.38 points (0.04%) to end at 1,074.03. Oil fell a little to $69.32 a barrel, while Gold rose $6 to $1,200. The VIX fell 3.42 to 34.90. 
    Michael Ashbaugh says: S&P testing key level.  
    Investors in most asset classes are visibly jumpy: Libor jump underlines rising tensions, and Swap, TED spreads jump
    In Rand Paul's Wall Street, David Weidner talks about what would happen if the government stays out of everyone's lives... which is essentially what happened during the Bush II years. Businessweek ran an editorial a couple of years ago pointing out that the gap between the ultra-rich and the rest of us was the greatest it's been since 1926. From 1947 to 1973, the median U. S. standard of living climbed dramatically. Paul Krugman, in Permanent Link to The Bestest Generation, shows what's happened since then, with the bulk of the gains in GDP going to our super-rich and little or nothing trickling down to us. Anyway, David Weidner notes that what were experiencing now is the result of weak or no intervention by the federal government in e. g., banking and other financial industries (not to mention other industrial activities such as offshore drilling). I question whether the world has become a global corporatocracy that, behind the scenes, runs everything for the benefit of large corporations and the ultra-rich... but of course, I don't know. In any case, Mr. Weidner's points concern that havoc that would occur if we further weakened government. (To get a real picture of what would happen if taken to the limit, imagine how it would be if all government were abolished... no more taxes, no more police or sheriff departments, no more fire departments, no more prisons, no more law enforcement, no more courts or punishments for crimes, no more street, highway, and Interstate  maintenance, no more city garbage pickup or city sewage disposal, and no more public schools. How long do you think we'd survive when gangs of thugs came after us armed to the teeth? Of course, we could contract with "protection agencies" for protection. Welcome to Somalia and Afghanistan!)
    Mark Hulbert enumerates differences between what's happening right now and what happened in the fall of 2008: Today vs. Oct. 2008  
    As I wrote on May 12th, it's important to remember that in order for a correction to occur, the world's pre-eminent investors must be convinced that a plunge into the pit is about to take place: "Things must be scary enough that institutional investors are frightened enough to sell stocks at a loss.". They have to be stampeded into parting with all their choice positions at a loss. 
    What happens in the U. S. tomorrow will probably depend upon what happens overseas tonight.
    Stock market futures are neutral tonight, and have been slowly falling.
     Why you shouldn't sweat Europe  
     Think housing is recovering? Think again. 

-25 (Pre-Market):
  U. S. stock market futures are following foreign stock indices down today, with U. S. futures now down about 2 %. 
    Paul Farrell writes: Crash is dead ahead. Sell. Get liquid. Now, while Mark Hulbert adds: Rush is on to jump on bearish bandwagon.